Mexican Peso gains on positive market sentiment

The Mexican Peso, which is sensitive to risk trends, is seeing gains across the board as market sentiment stays positive on Thursday. The Federal Reserve’s decision to keep interest rates at their current level despite persistently firm inflation in the US; the fact that Federal Reserve Chairman Jerome Powell considered a further rise in borrowing costs as “unlikely”, and the Fed’s decision to reduce its holdings of US Treasuries at a slower pace – a dovish move – were all factors supporting a positive outlook for markets. 

Lower Crude Oil prices, with WTI trading in the mid $79s, were a further positive factor for global risk sentiment as they reduce companies’ transportation and energy costs. 

Asian stocks markets traded mixed overnight, with the Nikkei closing down 0.19%, the Shanghai Composite Index closing down 0.26% but Hong Kong’s Hang Seng up by 2.44% and India’s Sensex 0.36% higher, at the time of writing. 

Mexican Peso traders now await S&P Global Mexican Manufacturing PMI data for April out at 15:00 GMT for further clues about how well the sector is bearing up under Banxico's restrictive interest-rate regime.

In March, Mexico’s Manufacturing PMI eased down to 52.2 from 52.3 in February but remained in expansive territory (above 50), as it has done since September 2023. 

A substantial decline in the metric could increase the chances of the Banxico reducing interest rates more rapidly than previously expected. This in turn would probably lead to a depreciation of the Mexican Peso, since lower interest rates reduce capital inflows. The opposite would be the case for a substantial rise in the PMI.